Nepal's commercial banks have significantly increased their margin loans, following the Nepal Rastra Bank's (NRB) adoption of a more flexible policy regarding share collateral lending. Margin loans, also referred to as share-backed loans, are loans disbursed against pledged shares.
According to NRB data, the total margin loans provided by commercial banks rose by 35.57% during the first five months of the current fiscal year (FY) compared to the same period last FY.
The data reveals notable growth in margin loans across several banks, with some showing remarkable expansion. Nepal SBI Bank, for instance, experienced an astounding 1,890% increase in margin loans. While the bank had disbursed just Rs 23.9 million in such loans during the first five months of the previous FY, this amount soared to Rs 476.5 million in the corresponding period this FY.
Among commercial banks, Standard Chartered Bank did not report any margin loan disbursement. Nepal SBI Bank disbursed the smallest volume of margin loans, followed by Machhapuchhre Bank, which still recorded a 103.29% increase in its margin loans.
Meanwhile, Nabil Bank, which held the largest portfolio of margin loans as of November last FY, expanded its loans by 2.78%. Global IME Bank, the second-largest provider of margin loans, recorded a significant 77.87% growth.
Overall, commercial banks disbursed an additional Rs 86.33 billion in margin loans during the first five months of the current FY, up from Rs 63.67 billion in the same period last FY. Across all banks and financial institutions, total loan disbursements rose by 32.98% to reach Rs 107 billion.
The surge in margin loans is attributed to NRB's relaxed policies, including the removal of the Rs 200 million borrowing cap for institutional investors in this FY’s monetary policy. Individual investors can now borrow up to Rs 120 million by pledging shares as collateral, while institutional investors face no borrowing limit.
In addition to NRB's policy changes, banks have been prioritizing margin loans due to excess liquidity in the financial sector.
Tara Prasad Fulel, an investor, noted that obtaining margin loans has become more accessible due to the liquidity surplus. "Banks are granting loans based on demand. If you request Rs 20 million, they may even suggest providing up to Rs 40 million," he said.
Similarly, Pokhara-based investor Bishnu Parajuli highlighted the ease of securing loans from development banks. "I can get as much as I can afford," she said. "While it was slightly challenging to secure loans from commercial banks, development banks readily offer loans, even over the phone."
